Gartner: Telcos Should Partner With Google, Rather Than Compete With It

Google a communications market disruptor and disintermediator.

Google's influence and market power with key telecommunications industry stakeholders is having a significant impact on the industry, according to Gartner Inc.

"The communications industry 'ecosystem' --- encompassing regulators, Internet service providers, advertising, and media customers and service providers -- finds itself in Google's crosshairs, not because Google necessarily wants to compete with telecom service providers or content developers, but because it finds their business process to be an impediment to innovation and change," said Alex Winogradoff, research vice president at Gartner.

Winogradoff said Google will continue to be a market disruptor and disintermediator, especially in the communications market. "Carriers should selectively partner with Google rather than trying to compete, especially in areas where they don't have differentiated and core assets," he said. "However, carriers should also find common ground with Google (for example, on network neutrality) and, if necessary, look for creative ways to oppose Google on issues critical to their survival."

Gartner said that coming late to the operating-system and mobile markets has not been a problem for Google and that its Android and Open Handset Alliance (OHA) activities have already had a profound effect on the mobile industry. In addition to disrupting the traditional telecom ecosystem, Google's actions are diluting the market potential and the service providers' ability to profitably monetize their investments in new markets (such as entertainment and software as a service (SaaS) applications).

Gartner has highlighted six critical actions by Google that have already had, or will have, the greatest impact on the telecom industry. These include:

700MHz Auctions -- Google pressured the Federal Communications Commission (FCC) to set aside the "C" Block (22MHz to 11MHz in the uplink and 11MHz in the downlink within the U.S. 700MHz spectrum auctions) as an open-access spectrum. All winning "C" Block bidders would be required to provide open access to applications (which cannot be blocked) and devices (which cannot be locked). Google's primary motivation was to encourage the development of open broadband network platforms to ensure they will be able to deliver bandwidth-intense over-the-air services and applications.

Formation of OHA and the Android Open Mobile-Device Platform -- On November 5, 2007, several technology and wireless companies jointly announced the formation of the OHA and the development of Android, a new software platform for mobile devices that includes an operating system (OS), middleware and key applications based on the Linux OS and open-source principles. This was quickly followed on November 12, 2007, with a preliminary release of the Android SDK, as part of Google's $10 million developer challenge. This will help ensure that application and access openness is maintained on the mobile Internet as effectively as on the wired network to enable Google's ad model to spread as successfully as it has on the wired Internet; to open up the "closed" mobile industry ecosystem to Google's applications; and to enable Google to exert a strong influence over the development of the next-generation mobile OS.

Fueling the Network Neutrality Debate -- Since the U.S. regulator (FCC) adopted four network neutrality principles designed "to encourage broadband deployment and preserve and promote the open and interconnected nature of the public Internet," Google and other Web-centric companies have been lobbying the U.S. Congress to codify these rules in favor of something called nondiscrimination in network design between the public and private Internet. In short, Google wants regulation to ensure that the public Internet remains free from potential discrimination and content blocking but also wants equality between the public and private Internet at no cost to customers or Web companies (in essence, no quality of service).

Looking to Own Both Static and Dynamic Location Information -- Google has been investing heavily to develop the world's most complete storehouse of geographic and mapping data supported by innovative applications that can detect mobile devices. Google wants to be "

the most-trusted source" and the best at matching up unique geographic location-based data so it can take advantage of just-in-time advertising opportunities derived from location-aware applications and bypass device manufacturers and carriers as the gatekeepers of location data.

Promoting "White Space" Spectrum Development -- Known as "white space" in the U.S. and "interleaved spectrum" in the U.K., this is the underutilized 800MHz spectrum that can be used to broadcast TV through the airwaves but also has highly favorable propagation characteristics for wireless broadband. A powerful industry lobby backed by Google, Microsoft, Philips, Dell, HP, Skype and others (known as the Wireless Innovation Alliance) has been urging the FCC to develop rules to unlock the potential of TV white spaces. Google's interest in white spaces is another effort to ensure that there are viable broadband options available for their services. The spectrum, which will likely be released as an open spectrum in 2010, would become another means for bypassing the carrier access network.

Engaging in Business via Google's "Cloud" and SaaS Offerings -- Google is looking to engage enterprises by getting them hooked on using Google's applications and cloud computing infrastructure. Making it easy for users to download Google applications and giving them free space on Google's cloud infrastructure will give Google great marketing insight to help it develop a presence within the small-and- midsize business (SMB) market initially, with eventual migration to larger enterprises where enterprises will come to Google for all their back-office SaaS needs. The impact on carriers looking to generate revenue from the SaaS business model within the SMB market will require carriers to clearly differentiate their applications from Google or partner with it.